Sustainability in Supply Chain Management

Supply Chain Sustainability Reporting Series by Emma Woodberry

Part 1 - Sustainability Reporting

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New Sustainability Reporting requirements are being introduced for Australian businesses and organisations

In June 2023, the ISSB released the inaugural global sustainability standards, which were an exercise in global baselining and alignment – in other words, getting everyone singing from the same song sheet when it comes to sustainability reporting. In March this year, a Treasury Bill was introduced into parliament which outlines the reporting obligations for Australian organisations, with commencement dates from 1 January 2025 – which is expected to be passed sometime this year. Organisations are encouraged to start preparing for what this means for their reporting requirements.

The reporting requirements will cover governance, strategy and risk management processes and controls in place for identifying and mitigating material sustainability related risks, including performance against sustainability metrics. These reporting obligations will have significant impacts on supply chain operations, as it will drive greater transparency, accountability and sustainability across entire value chains both locally and globally. Supply Chain leaders and managers may be called upon to report on or start measuring metrics against specific sustainability or climate related targets. Additional reporting requirements will be linked with existing financial reporting obligations at year end, so organisations will need to provide sustainability inputs to financial statements.

Reporting will need to address opportunities and risks as they relate to sustainability, for example, how climate change related disruption could impact an organisation’s ability to meet customer needs.

Reporting requirements will cover two key areas: Emissions and Climate related risk

Understand your Emissions

Measuring Scope 1 and 2 carbon emissions can be simple – mapping out your supply chain and determining the carbon footprint of your owned and controlled operations. Scope 3 is where the complexity begins – upstream activities can include the carbon footprint of all purchased goods and services, employee travel and waste generation for example, and downstream activities includes how sold products are used and disposed of. Do you know what happens to your products once they are in the customer’s hands?

Supply chain mapping is useful to understand where your value chain starts and ends, from processing of raw materials through to disposal of goods produced in your supply chain. This introduces the first layer of visibility of the extent of your Scope 3 emissions. From here it is important to understand what your suppliers and customers are doing to measure, manage and reduce their emissions, and how you are measuring, managing and mitigating your own emissions.

Risk and Resilience in your Supply Chain

Supply chain mapping provides a good overview of where emissions are generated across your value chain and will also provide a baseline for assessing climate change disruption risk. Conducting a risk and resilience assessment across your supply chain will identify areas of weakness or risk due to climate change related disruption. Areas such as critical infrastructure or vulnerability to disruption will be explored and assessed, identifying risk mitigating actions that need to be taken.

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Moving Forward

Baselining your Scope 1, 2 and 3 emissions is the minimum, setting targets and management plans is the next step. This will involve operational initiatives that encourage efficiency within the organisation, as well as working with suppliers to increase transparency and visibility of upstream operations. Best practice then involves setting Science Based Targets (SBTs) that are ambitious and reporting progress against these targets.

Proactive risk mitigation steps for your supply chain extends to core supply chain efficiency activities such as network optimisation, supplier relationship management and lean inventory practices. Understanding your emissions and building a resilient supply chain will drive sustainable practice.

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Where we can help

At Trace, we have tried and tested frameworks that support emissions baselining and measurement, as well as risk and resilience assessment.

Carbon Emissions Measurement

We can support you in understanding your emissions, identifying opportunities to reduce your footprint and improve your overall sustainability through the following high level 4-step approach:

1. Map your supply chain including your nodes, upstream supply chains, and downstream product lifecycles

2. Measure emissions using Greenhouse Gas (GHG) Protocol data (Scope 1, 2 and 3)

3. Set targets that are ambitious, measurable and supportive of strategic goals

4. Define and implement a set of initiatives that will support efficiency and emissions reduction activities

Our risk and resilience framework

Our Supply Chain Risk & Resilience Assessment Model aligns with the framework adopted by the Federal Office of Supply Chain Resilience and the Australian Productivity Commission, which are used to assess supply chain risks to critical products and services. Our model covers three stages:

1. Inputs Stage: identifies the qualitative and quantitative inputs to a resilience assessment including supply chain mapping, disruption scenarios, stakeholder engagement and existing plans and policies

2. Assessment Stage: measures the level of resilience, residual risks and sustainability impact through understanding the criticality and vulnerability of the supply chain

3. Actions Stage: identifies the key actions required to update and implement plans and policies that will secure future resilience and mitigate risks identified in Stage 2

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Understanding vulnerability to climate change disruption, and the actions being taken to overcome this vulnerability will be key requirements for future reporting regulations.

Get in touch today to see how we can help your supply chain sustainability journey.

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Emma Woodberry

Senior Manager

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Why Sustainability Matters in Mining

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Australia's mining sector is a powerhouse, a crucial contributor to the nation's economy. However, it's undeniable that mining activities have substantial environmental footprints. Today, it's more important than ever for mining companies to embrace sustainability and reduce their environmental impact. One of the most effective ways to do this is through implementing strategic supply chain projects. In this article, we will explore how Australian mining companies can improve their sustainability through supply chain innovations.

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Before we delve into the solutions, let's first understand why sustainability is a pressing concern for mining operations in Australia. Mining operations often lead to habitat destruction, water contamination, and greenhouse gas emissions. These issues can have a devastating impact on Australia's unique biodiversity and contribute to global climate change.

Furthermore, consumers, investors, and regulatory bodies are increasingly demanding greater sustainability from industries worldwide, including mining. Companies that fail to address these demands risk damaging their reputations, losing customers and investors, and facing stricter regulations.

Sustainable Supply Chain Management in Mining

To address these challenges, mining companies need to take a holistic approach and review their entire operations from extraction to end-product delivery. This is where the concept of sustainable supply chain management comes in.

Sustainable supply chain management is about integrating environmental and social considerations into supply chain operations. This includes sourcing materials responsibly, optimising transportation and logistics to reduce emissions, and ensuring the end-of-life treatment of products is environmentally friendly.

How to Improve Sustainability through Supply Chain Projects

Here are several ways Australian mining companies can improve their sustainability through supply chain projects:

1. Responsible Sourcing

Mining companies should ensure that their raw materials are sourced responsibly. This could involve sourcing from suppliers who adhere to sustainable practices or using technologies to make extraction processes less destructive. A blockchain-based supply chain can also provide transparency and traceability, ensuring that every step of the supply chain meets sustainability standards.

2. Energy-Efficient Transportation

Logistics is a significant contributor to a company's carbon footprint. Mining companies can invest in energy-efficient vehicles and optimise their logistics routes to reduce fuel consumption. Additionally, they can explore alternative, cleaner sources of energy for transportation, such as electric vehicles powered by renewable energy.

3. Waste Management

Waste management is a significant challenge in the mining industry. Through innovative supply chain projects, mining companies can find ways to reuse or recycle waste materials. For example, some mining companies are exploring ways to turn tailings – the waste left over after mineral extraction – into construction materials.

4. Supplier Engagement

Finally, mining companies should engage with their suppliers and encourage them to adopt more sustainable practices. This can involve providing training, resources, or incentives to help suppliers improve their sustainability performance.

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Improving sustainability in the mining sector is a complex task, but it's an essential one.

By focusing on their supply chains, Australian mining companies can significantly reduce their environmental impact and meet the rising demands for sustainability from consumers, investors, and regulatory bodies. It's not just good for the environment – it's good for business too.

Implementing sustainable supply chain projects is a journey that requires ongoing commitment and investment. But the rewards – a healthier planet, a stronger reputation, and a more resilient business – are worth the effort.

Australia's mining sector has the potential to lead the way in sustainable practices. By embracing these strategies, we can make a positive change for our future. It's time to dig deep for sustainability.

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Contact us today, trace. your supply chain consulting partner.

Supply Chain Sustainability Reporting Series by Emma Woodberry

Part 3 – Modern Slavery in the supply chain and reporting obligations

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What is Modern Slavery?

Modern slavery describes a workforce that is exploited during their employment, without an option to leave or refuse due to threats, violence, coercion, deception or abuse of power. It comes in many forms including human trafficking, forced labour, child labour, and debt bondage.

Due to the nature of the work involved in production, processing, packaging and transport of goods, there is a high risk of modern slavery in most supply chains in Australia – these risks vary by industry and are heightened in imported food produce and textiles.

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Modern Slavery Reporting

Modern Slavery reporting helps to hold organisations accountable for their actions and policies, ensuring they are taking steps to prevent and address modern slavery within their operations and supply chains. Australia’s Modern Slavery Act 2018 has encouraged transparency and ethical practices for Australian organisations to help identify patterns and hotspots, which can be targeted for prevention efforts. A recent independent review of the Act has identified key changes that will impact organisations existing reporting, including:

Increased modern slavery due diligence requirements

Requiring organisations to have due diligence processes in place to effectively identify risks in their supply chains through supplier assessment

New mandatory reporting criteria

The threshold for reporting on Modern Slavery risks in the supply chain via a published Modern Slavery statement has been reduced from $100m to $50m annual consolidated revenue

New penalties for non-compliance

Financial penalties are likely to be introduced for failure to comply to with any of The Acts requirements, such as failing to publish a modern slavery statement or failing at having an appropriate due diligence process in place.

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Understanding your supply chain’s risk of Modern Slavery

When looking to understand the level of risk in your supply chain, it’s important to understand the inherent risk based on your industry and types of goods and services you offer. For most Australian operations, the risk is focused on supplier’s supply chains, and depending on where operations are based, transport and logistics processes.

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Given the need for increased due diligence coming into legislation, trace. takes a two-way approach to modern slavery risk assessments:

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1: Assess current maturity in supplier due diligence and risk assessment

- Review internal processes, systems and data used when selecting and onboarding suppliers

- Assess existing risk assessment processes and outcomes to determine effectiveness

- Identify opportunity to uplift and improve due diligence and risk management

2: Identify and assess modern slavery risks within the value chain

Map out the value chain in providing goods and services, including supplier’s supply chains

Assess modern slavery risk by each supplier and identify actions taken to date

Identify improvement opportunities and develop an implementation plan

Develop / update modern slavery statement and publish in line with The Modern Slavery Act 2018

Determine adequate reporting required to ensure ongoing transparency and risk management

Modern Slavery is one element of sustainability reporting for organisations, feeding into broader ESG objectives. You can read more about supply chain sustainability reporting in our first article, and Scope 3 carbon emissions in our second.

Get in touch today to see how we can help you identify the effectiveness of your due diligence processes, or assess your risk for Modern Slavery in the supply chain.

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Emma Woodberry

Senior Manager

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